Slides
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2 Agenda and speakers Taylor Morrison: On the Road to 20K Sheryl Palmer, CEO and Chairman 01 The State of the Housing Market Ali Wolf, Chief Economist, Zonda02 Investing Efficiently in Core Locations03 Yardly: Our Build-to-Rent Platform Erik Heuser, Chief Corporate Operations Officer04 Spotlight on Strategic Shifts Dar Ahrens, Area President, West Charlie Enochs, Area President, Central Steve Kempton, Area President, East 05 The Power of Finance as a Sales Tool Tawn Kelley, President, Financial Services06 Returns-Focused Capital Allocation Curt VanHyfte, Chief Financial Officer 07 Digital Transformation Stephanie McCarty, Chief Marketing Officer 08 Board Perspective Pete Lane, Lead Independent Director09 Question & Answer Session All Presenters10
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A flashback to the strategy we presented to our board of directors in 2014 Ongoing Assess cyclical impact Create operational preparedness for growth Position company to be nimble as opportunities arise Near-term Organic Growth and Regional M&A Mid-to-long term Consolidation and Strategic M&A 2013 IPO
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4 Our original footprint # of closings9 Divisions 5 States
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5 21 Divisions 12 States Our expanded footprint with room for outsized growth # of closings
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6 A transformed company 2015 2024 Market CapitalizationClosings Diluted EPS Total homebuilding lots $2.0B6,311 $1.85 43K $6.3B12,896 $8.27 86K 2x 2x 3x 5x As of year-end
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7 9% 12% 19% 2016-18 2019-21 2022-24 Return on Equity** Transformed financial strength $298 $631 $709 2016-18 2019-21 2022-24 Operating Cash Flow ($M) $3.9 $6.1 $7.9 2016-18 2019-21 2022-24 Total Revenue ($B) 8% 8% 15% 2016-18 2019-21 2022-24 Pre-tax Income Margin* Shareholder returnsScale Efficiencies Cash generation Average of periods *Calculated as annual income before taxes as a percent of total revenue **Calculated as annual net income divided by the average of stockholders’ equity in the current and prior year
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8 A key driver of our transformed results is our strengthened gross margin performance 18% 17% 23% 24% 23-24% 2015-17 2018-20 2021-23 2024 2025* GAAP Home Closing Gross Margin Average of periods *Guidance range provided on Feb. 12, 2025 Optimized, scaled platform -3% -2% -1% 0% 1% 2% 2015-17 2018-20 2021-23 2024 2025* Differential versus Mid-Cap Builder Average Includes MTH, MHO, KBH and TPH *Comparison of consensus sourced from Bloomberg
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9 Diversification Improves growth opportunities and profitability while minimizing cyclical risk What makes Taylor Morrison unique Customer centricity Service, underwriting, product offerings and a brand that put our customers first Courage to chart our own path Conviction in long-term strategies designed to generate differentiated performance
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10 Multiple dimensions of diversification across our business Based on mix of 2024 closing units, except for buyer group based on sales Resort Lifestyle 23% First Move Up 18% Second Move Up 29% Entry Level 30% <$400K 24% $400-500K 23%$500-600K 21% $600-700K 15% >$700K 17% Central 28% East 38% West 34% Spec 55% To-Be-Built 45%Buyer Group Sales Type Base ASPClosings by Area
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11 Our home closing gross margin resiliency is a function of our diversified portfolio Average differential between to-be-built and spec home pre-interest gross margins 22% 25% 27% West Central East GAAP home closings gross margin in 2024 22% 24% 25% 27% Entry Level First Move Up Second Move Up Resort Lifestyle 5% 5% -4% 7% 2015-17 2018-20 2021-22 2023-24 GAAP home closings gross margin in 2024
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12 59% 44% 40% 34% 23% 30% 37% 41% 5% 14% 14% 16% 10% 9% 7% 7% 3% 3% 2% 2% 2021 2022 2023 2024 Ethnic and Racial Composition of Taylor Morrison Homebuyers Caucasian Asian and Indian Hispanic African American Other Understanding our customers is key to our success
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13 Across generations, our buyers have healthy credit profiles All Borrowers Gen X (1965-1980) Millennials (1981-1996) Gen Z (1997-2012) Share of Closings 100% 26% 54% 6% Average Sales Price $601,000 $633,000 $600,000 $446,000 Loan-to-Value 77% 73% 82% 88% Debt-to-Income 40% 39% 40% 42% Credit Score 752 754 750 728 First-Time Buyers* 45% 27% 56% 88% Gift Funds 15% 10% 19% 27% Taylor Morrison Home Funding borrowers in 2024 *Per HMDA definition
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14 The courage to chart our own path Opportunistic investments in core locations Balanced portfolio Targeted and customizable finance incentives First-of-its-kind digital sales platform Yardly build-for-rent business Disciplined, returns-focused capital allocation
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15 On the road to 20,000 home closings by 2028
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16 Community Pipeline ~50% more grand openings planned in 2025-28 than in the prior four years Lot Supply ~90% of lots needed to reach 20K closings are already approved Investing in Growth Nearly $12B of land spend planned through 2028
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17 Doubling of Esplanade deliveries Higher sales paces and above-average gross margins Understanding our evolving consumer Investing in highest-ROE opportunities Existing market share gains and opportunistic expansion into new markets
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Prior targets New Targets On the road to 20K closings by 2028 Average Home Closings Growth ~10% At least 10% Home Closings Gross Margin Low-to-mid 20% range Low-to-mid 20% range Annualized Monthly Sales Pace Low-three range Low-three range SG&A Ratio - Mid-to-high 8% range Controlled Lot Percentage 60-65% At least 65% Return on Equity Mid-to-high teen range High-teen range 18 Confidence in delivering our long-term targets
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19 Structural transformations in our operating capabilities support enhanced performance Growth Potential Sales Pace SG&A Gross Margin Return on Equity Growth Potential Expanded consumer segmentation captures full spectrum of demand Broader market footprint Platform equipped for market-level share gains Simplification and standardization (plans, options, processes) Sales Pace Underwriting requirement of an expected sales pace in the three-range Shift to larger, more efficient communities Increased penetration of entry-level price points Higher mix of faster-pacing spec offerings Optimized community footprint allowing for better sales team coverage SG&A Fixed leverage alongside higher revenue base Centralization of sales and customer service functions Automation through AI-bots Centrally-managed online sales team to support divisions Virtual tools that encourage lower broker participation Gross Margin Successful integrations of under-scaled acquired businesses Canvas cost savings from purchasing leverage and vendor rebates Canvas revenue opportunity with alignment to customer preferences Floorplan optimization and value engineering Reduced debt carrying a lower capitalized interest burden Expansion of our successful Esplanade lifestyle brand Tactical use of finance incentives among generally well-qualified buyers To-be-built and spec home optimization by consumer group Return on Equity Higher expected revenue and operating margin Capital-efficient land financing tools with accretive IRR trade-off Programmatic share repurchases Increased asset turnover
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State of the housing market Ali Wolf Chief Economist
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Tracking the entire building lifecycle • 500+ housing and economic metrics • Satellite imagery, sales office visits, in- house research department, surveys, and driving communities • Curated and insightful market analysis Access the housing industry’s most comprehensive research platforms
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Today’s Agenda 1. Supply trends 2. Sales and incentives 3. Buyer differences 4. Policy changes 5. Forecasts and final thoughts
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Supply trends
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National listings: +28% YOY , -23% from ‘19 +13.5% MOM -23.7% YOY
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Mix of buyer’s, seller’s and balanced markets
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Part strategy, part demand +13.5% MOM -23.7% YOY Source: Zonda Zonda has a unique view into this given our ownership of newhomesource.com + our database that tracks over 15K communities
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+6% YOY , -18% from 2019 nationally
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Sales and incentives
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“Fine” start to the year
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An average market nationally • 34% were overperforming • 34% were average • 32% were underperforming ZMR doesn’t account for what it takes to sell a home
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56% TBB, 73% QMI Two major headwinds: 1. Incentives have lost their effectiveness re: urgency. 2. Incentives are expensive. Average of 4% of local home prices Incentives can be desirability or affordability related
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Income-based buyers are needing to stretch
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Buyer differences
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Incentives can only help so much • 24% were overperforming • 28% were average • 48% were underperforming
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Pretty dramatic shift towards repeat buyers +13.5% MOM -23.7% YOY
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Lock-in effect meets incentives 3.0% to 5.0% is MUCH easier than 3.0% to 6.7% • 40% were overperforming • 32% were average • 28% were underperforming
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The power of wealth • 60% were overperforming • 10% were average • 30% were underperforming Risks? • Uncertainty • Higher for longer rates • Trends in the stock market
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Policy changes
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Builder take: tariffs +13.5% MOM -23.7% YOY “Our suppliers are watching this closely” “Worried about cost increases” “As we saw last time, this will create supply disruptions and cost increases at least in the short run and potentially longer”
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41 Tariffs Still Unfolding: Likely Costs Bump of +6-14% If Building Products are Not Excluded, with Lumber, Window/Door Components, and Appliances Impacted Estimates vary by input
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50/50 on deportations +13.5% MOM -23.7% YOY
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Forecasts and final thoughts
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Our forecast: 2.5% growth in SF starts We may be overstating growth: • Pullback in spec starts • Slower consumer demand • Challenges in top markets (-5% to +5%)
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Things to watch for 2025 • New administration: Pro growth and less regulation good for wider economy, but tariffs, immigration, and interest rates disproportionately impact our industry • Persistent cost pressures (incentives, land, labor, materials) • Rising cost to buy and hold (homeowners insurance, property taxes, HOAs), but new homes generally have an advantage • Rising resale inventory, new home inventory, BTR inventory, and traditional MF inventory in some markets(demand is up too, but still worth watching) • Cracks in the consumer • Affordability
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Ali Wolf Chief Economist Zonda awolf@zondahome.com
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Investing Efficiently in Core Locations
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48 Prudent land investment is the foundation of our long-term success Physical Status Financing Tool Deal Structure Annual Strategic Plan Return-Optimized Capital Allocation per Division Annual 5-Year Business Plan Ongoing New Project Deal Flow Diverse consumer segmentation Returns-focused underwriting guardrails Self-development expertise Capital-efficient financing tools Quality locations Core sub-markets
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49 A transformed land portfolio +50% Lots per community +44% Absorption pace Underwriting Approvals 2023-24 versus 2018-19 +100 bps Expected IRR Then 2018 Now 2024 Lots Owned and Controlled ~51,500 ~86,100 Total Years of Supply 5.9 6.6 Owned Years of Supply 4.4 2.8 Controlled Share 26% 57% Self-Developed Approved Projects 58% 85% Third-Party Developed Approved Projects 42% 15% Beginning in 2021, the methodology for owned and controlled lots was adjusted to exclude owned lots where vertical constructi on has begun and include in controlled lots those with an earnest money deposit that have not yet been formally approved by our investment committee.
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50 0% 10% 20% 30% 40% 50% 60% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Target Targeting a controlled share of at least 65% Builder JVs 22% Seller Financing 10% Land Banking 27% Option Takedown 16% Bulk Purchase 25% Controlled lot percentage Mix of controlled lots as of Q4 2024 Beginning in 2021, the methodology for owned and controlled lots was adjusted to exclude owned lots where vertical constructi on has begun and include in controlled lots those with an earnest money deposit that have not yet been formally approved by our investment committee.
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51 Optimizing each project with the right financing tool Bulk Structured Variance Gross Margin 23.4% 22.6% (0.9)% IRR 21.7% 24.5% 2.8% Seller Financing 3-year term with annual paydowns at 8% interest Bulk Structured Variance Gross Margin 31.1% 30.8% (0.3)% IRR 17.0% 20.0% 3.0% Bulk Raw Takedown Three-phase takedowns 18-24 months apart Bulk Structured Variance Gross Margin 28.6% 27.0% (1.7)% IRR 20.3% 28.6% 8.3% Land Bank 15% upfront deposit with 10% interest Bulk Structured Variance Gross Margin 26.8% 26.3% (0.6)% IRR 29.2% 31.4% 2.2% Builder Joint Venture 50/50 joint venture with 50% financing at 9% interest Bulk Structured Variance Gross Margin 21.1% 22.5% 1.4% IRR 18.1% 19.0% 0.9% Seller Profit Participation Price concession for participation above margin / profit guardrails All scenarios are illustrative examples
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52 ~86% Average share of Taylor Morrison communities in “core” locations, as defined by local operating teams Our site selections prioritize quality locations that meet the needs of our targeted consumers Charlotte Houston Phoenix Sarasota
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53 Compared to peers, Taylor Morrison tends to concentrate in prime core submarkets Taylor Morrison Builder BBuilder A Builder C Builder D Builder E
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54 Strategic positioning in core submarkets has minimized our exposure to rising inventory competitive resale listings Square Footage Type Age Amenity Price Point Total resale listings Naples Sarasota Orlando Atlanta Sacramento Houston Phoenix Las Vegas Outside of our footprint Average resale months of supply (4Q 2024) Inside our footprint
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55 Importance of community design 9% more important than the home 77% as important 15% not as important Continually engaging with and learning from our shoppers and buyers Based on survey responses received in February 2025 from Taylor Morrison home shoppers Barriers to homebuying 61% no barriers to financing or paying all cash 10% downpayment 8% interest rate 8% selling existing home 14% income, debt or other Considering resale homes 41% no 59% yes Importance of our ranking as America’s Most Trusted Home Builder® 82% Moderately to substantially important
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Yardly: Our Build-to-Rent Platform
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57 Active in 9 markets in 4 states 40 communities owned and controlled 13 JV-owned and 27 wholly-owned $375M balance sheet investment 11 communities currently leasing 9 communities under development Low-maintenance living, amenities and private backyards offer residents an attractive alternative to traditional multi-family rentals #1 As of year-end 2024 National developer of planned build- to-rent units according to Zonda
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58 • Housing shortage • Affordability challenges • Superior multi-family living experience The strategic rationale for Yardly • Land identification, entitlement and development • Construction • Leverage TMHC support functions • Consumer groups • Profit generation • Building sciences innovation • EPS and ROE accretion at scale • Pursue standalone financing to support efficient growth • Achieve independence at scale Backdrop Core Competency Alignment Incremental Opportunity Sustainable Platform
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Roadmap to stabilization 59 Underwrite to gross margins and IRRs that meet or exceed core homebuilding business Continue to pursue construction and leasing efficiencies Navigate near-term interest rate environment and manage existing pipeline Secure “next” financing vehicle 0 20 40 60 2025 2026 2027 2028 Expected dispositions, subject to market opportunity Owned and controlled Yardly communities Key Revenue Drivers • 210 to 240 average units per community • ~$290K average current sales price per unit • 20% TMHC post-leverage equity position in JV-owned projects • $2M management fee per JV-owned project
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Spotlight on Strategic Shifts
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61 Generational tailwinds 14M Growth forecasted in 55+ U.S. population by 2033 $114T Net worth of 55+ households 2M+ Pool gallons 200+ Sport courts 3+ Golf courses 25+ Spa treatment rooms 15+ Restaurants 30+ Bark parks Spotlight on Esplanade Our amenity-rich resort lifestyle living brand has exceptional growth potential as it expands across the country Growth pipeline 36 Active communities at year-end 85+ Projected new communities Source: John Burns Research and Consulting
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The Esplanade Difference +35% Average sales price ($779,000) +800 bps Home closings gross margin (31%) +4x Lot premium per home ($74,000) -100 bps Land and development residual (22%) -18% Real estate broker participation (64%) +3x Option premium per home ($171,000) Note: 2024 Esplanade metrics as compared to the average of all other home closings
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63 Spotlight on Phoenix Scale +65% home closing volume Consumer Appeal +500 bp option margins Purchasing Leverage +60% vendor rebates Construction Efficiencies +8% inventory turns Customer Diversification Expanded entry-level and introduction of resort lifestyle Product Alignment -65% active floorplans Option Rationalization -48% design product SKUs Spec Home Management 100% Canvas package utilization Land-Lighter Pipeline +27% controlled lot percentage M&A integrations expanded breadth and scale, creating permanent efficiencies that are driving improved bottom-line results Increased Revenue +150% Higher Gross Margins +300 bp Lower SG&A -100 bp Stronger EBIT Margins +300 bp Comparisons are of 2022-24 average versus 2015-17 average. Option and floorplan count comparisons are peak-to-current. Gross margin is before interest. Strategic shifts Operational enhancements Financial performance
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64 Canvas design packages have streamlined operations by aligning offerings with customer preference 61% of closings utilized Canvas in 2024, including 100% of specs 79% reduction in company-wide design product SKUs since 2020 1,000+ basis point improvement in spec home option margins since 2020 60 days Time saved for Canvas customers by eliminating design studio visits after contract signing
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65 Spotlight on Texas Control our Destiny Reduced reliance on outside developers and concentration in restrictive master plans in favor of larger, self-developed projects 23% → 82% self-developed approvals Improve Capital Efficiency Utilized off-balance sheet financing and options to increase capital efficiency 29% → 65% controlled lot percentage Streamline Offerings Simplified production by aligning offerings with customer preferences rather than master plan guidelines 1,412 → 139 active floorplans Shift in strategy to simplify product offerings and reduce reliance on third-party developers Strategic shifts Operational enhancements Financial performance Fewer but Larger Outlets -48% community count Higher Sales Paces +2x monthly absorptions Consumer Appeal +700 bp option margin Construction Efficiencies +24% inventory turns More Closings +37% Higher Revenue +57% Higher Gross Margins +800 bp Lower SG&A -100 bp Stronger EBIT Margins +3x Comparisons are 2024 versus 2018, unless noted. Option and floorplan count comparisons are peak-to-current. Gross margin is before interest and excludes impact of 2018 warranty charge.
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66 Floorplan optimization has improved cost efficiency and buyer satisfaction Master-planned architecturally complex elevation Self-developed architecturally optimized elevation Prior plan • Outboard patio • Inefficient front porch • Non-standard cabinet boxes • Eight window sizes • 9-10’ ceiling height New plan • Integrated patio • Efficient porch • Standard 30” cabinet boxes • Three window sizes • 8’ ceiling height 11% Cost savings per square foot Prior New Prior New
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The Power of Finance as a Sales Tool
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68 Taylor Morrison’s Financial Services suite of businesses ~450 Team members $816M 2020-24 Revenue $338M 2020-24 Pre-tax earnings 2024 Revenue
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69 Meeting the needs of new construction homebuyers 59% Taylor Morrison Insurance 99% Inspired Title Services 2024 capture rates Peace of mind that buyers will be able to close on time Affordable homeowners’ insurance solutions Upfront loan consultation and pre-qualification Integrated backlog management Innovative mortgage products with competitive interest rates One-stop-shop home financing journey Complimentary credit qualification advisory 89% Taylor Morrison Home Funding
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70 A tailored and tactical incentive strategy to maximize the benefit to our buyers and builder Closing Costs Forward Commitments Temporary Buydowns Permanent Buydowns Extended Rate Locks
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71 Nearly half of Esplanade Resort Lifestyle buyers pay all cash… All Borrowers Esplanade Non-Esplanade Average Sales Price $601,000 $751,000 $590,000 All Cash 16% 49% 12% Loan-to-Value 77% 58% 79% Debt-to-Income 40% 38% 40% Credit Score 752 773 750 Household Income $179,000 $233,000 $175,000 Age 43 61 42 Taylor Morrison Home Funding borrowers in 2024 …while those taking a mortgage have excellent credit metrics
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Digital Transformation
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73 The “why” behind our digital transformation • How consumers shop for products and services has changed dramatically in the last decade; however, the homebuilding industry still lags consumer expectations. • Today, consumers desire self-service, convenience, personalization, pricing transparency and seamless online/offline experiences. • Home shopping isn’t linear. Providing opportunities to engage in different ways that feel right to our consumers is how we differentiate.
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74 Digital transformation timeline Online appointments Self-guided tours Online home reservations July 2020: March 2021: Feb. 2022: Dec. 2023: Current: QMI TBB 16% Conversion $100 hold Canvas packages 56% Conversion 2020: Current: 2020: Current: New community landing page March 2024 New homepage Dec. 2024 20242020 2021-2023 7% Conversion 13% Conversion 3% Conversion 9% Conversion
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75 Evolution of eCommerce and sources of inspiration Automotive Hospitality 1990s: Online pricing transparency. No haggling Today: Buying online Today: Entire journey from no key check-in, ordering food/workout clothes from your room and digital checkout. 1996: Online booking
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76 It felt like I was buying a home from Amazon … the process was super simple and fun. And at the end I had a home perfectly tailored for me, ready to put in my cart and check out! It’s like a one-stop-shop for homebuilding. No BS, super easy, you see what you get. They also have pricing transparency throughout, which I loved! —Buyer, (29/F/HH Income: $175k+) “
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7777 Reservations driving improved sales conversions as consumer adoption grows 2024: 18% of Total Sales 52% Conversion Rate 23,078 Leads Collected Interest rates increase $100 hold added 0% 10% 20% 30% 40% 50% 60% 2020 2021 2022 2023 2024 Conversion Rate Sales Contribution 53% Reserved before visiting community Online reservation conversion and adoption
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400 bps 78 Partial reservations and personalized nurturing allows us to operate more akin to retail 17,644 Partial Online Reservations in 2024 14% Partial Reservation-to-Sales Conversion Rate Year-Over-Year Increase in Conversion Rate
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79 Digital to-be-built home reservation sales generate financial wins $50K Reservation Sales Average TBB Price 3% Cancellation Rate ~3 weeks Average Time From Reservation to Contract Realtor Participation 600 bps Comparison of to-be-built home reservations compared to non-reservation to-be-built home sales in 2024
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Returns- Focused Capital Allocation
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81 Strong balance sheet provides opportunity to fund growth while continuing to reward shareholders $527 $450 $500 2025 2026 2027 2028 2029 2030 Senior Note Maturity Schedule 33.7% 41.9% 38.7% 24.0% 20.0% 2016 2018 2020 2022 2024 Homebuilding Net Debt to Capitalization $ in millionsSee appendix for reconciliation
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82 Alongside less debt, lower capitalized interest burden benefits gross margin with further improvement ahead ~1.0% target low-to-mid 20% target 18.4% 16.9% 23.1% 24.4% 2.7% 2.0% 1.9% 1.5% 21.1% 18.9% 25.0% 25.9% 2015-17 2018-20 2021-23 2024 Pre-interest home closings gross margin Capitalized interest % of home closings revenue Reported home closings gross margin Average of periods
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Capital allocation priorities 83 Maintain strong liquidity and balance sheet strength Prudently manage senior notes outstanding and other liabilities Efficiently invest in profitable growth across our homebuilding and build-to-rent platforms Return capital to shareholders via share repurchases Homebuilding land investment $5,775 Build-to-rent investment $264 Share repurchases $852 Senior debt repayment $1,117 Over the last three years, Taylor Morrison generated $2.1B of operating cash flow, after investing nearly $6.0B in total land acquisition and development Aggregate capital deployed from 2022-24 $ in millions
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84 Capital allocation designed to support high-teens returns on equity 2025 Targets Targets on the road to 20K closings by 2028 $300-350 million Share repurchase target Over $1 billion Cumulative share repurchases expected in 2026-28 ~$2.6 billion Planned homebuilding land investment Around $9 billion, dependent on financing Allocated to superior ROE opportunities in the Central and East areas 15-20% Ending homebuilding net-debt-to-capitalization 10-15% Assuming paydown of 2027 senior note maturities Mid-teens Return on Equity High-teens Supported by operational efficiencies and share repurchases Note: A reconciliation of the forward-looking homebuilding net-debt-to-capitalization ratio to the most directly comparable GAAP financial measure cannot be provided without unreasonable effort because of the inherent difficulty of accurately forecasting the occurrence and financial impact of the adjusting items necessary.
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85 Shareholder returns Diversified strategy Underwriting guardrails Capital efficient investment Higher-pacing communities Outsized growth Superior gross margins Cost leverage Growing cash generation
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86 This presentation includes “forward-looking statements.” These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words ““anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “may,” “will,” “can,” “could,” “might,” “should” and similar expressions identify forward-looking statements, including statements related to expected financial, operating and performance results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future. Such risks, uncertainties and other factors include, among other things: inflation or deflation; changes in general and local economic conditions; slowdowns or severe downturns in the housing market; homebuyers’ ability to obtain suitable financing; increases in interest rates, taxes or government fees; shortages in, disruptions of and cost of labor; higher cancellation rates of existing agreements of sale; competition in our industry; any increase in unemployment or underemployment; the seasonality of our business; the physical impacts of climate change and the increased focus by third-parties on sustainability issues; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; significant home warranty and construction defect claims; our reliance on subcontractors; failure to manage land acquisitions, inventory and development and construction processes; failure to develop and maintain relationships with suitable land banks; availability of land and lots at competitive prices; decreases in the market value of our land inventory; new or changing government regulations and legal challenges; our compliance with environmental laws and regulations regarding climate change; our ability to sell mortgages we originate and claims on loans sold to third parties; governmental regulation applicable to our financial services and title services business; the loss of any of our important commercial lender relationships; our ability to use deferred tax assets; raw materials and building supply shortages and price fluctuations, including as a result of tariffs; our concentration of significant operations in certain geographic areas; risks associated with our unconsolidated joint venture arrangements; information technology failures and data security breaches; costs to engage in and the success of future growth or expansion of our operations or acquisitions or disposals of businesses; costs associated with our defined benefit and defined contribution pension schemes; damages associated with any major health and safety incident; our ownership, leasing or occupation of land and the use of hazardous materials; existing or future litigation, arbitration or other claims; negative publicity or poor relations with the residents of our communities; failure to recruit, retain and develop highly skilled, competent people; utility and resource shortages or rate fluctuations; constriction of the capital markets; risks related to instability in the banking system; risks associated with civil unrest, acts of terrorism, threats to national security, the conflicts in Eastern Europe and the Middle East and other geopolitical events; the scale and scope of current and future public health events, including pandemics and epidemics; any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; risks related to our substantial debt and the agreements governing such debt, including restrictive covenants contained in such agreements; our ability to access the capital markets; the risks associated with maintaining effective internal controls over financial reporting; provisions in our charter and bylaws that may delay or prevent an acquisition by a third party; and our ability to effectively manage our expanded operations. In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K and our subsequent quarterly reports filed with the Securities and Exchange Commission (SEC) as such factors may be updated from time to time in our periodic filings with the SEC. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations, except as required by applicable law. Forward-looking statements
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87 Reconciliation of non-GAAP measures Debt to Capitalization Ratios Reconciliation 12/31/2016 12/31/2018 12/31/2020 12/31/2022 12/31/2024 Total debt 1,586,533 2,209,596 2,928,395 2,483,861 2,120,483 Plus: unamortized debt issuance cost, net 12,516 (3,746) (2,365) 10,767 6,616 Less: mortgage warehouse borrowings (198,564) (130,353) (127,289) (306,072) (174,460) Total homebuilding debt 1,400,485 2,075,497 2,798,741 2,188,556 1,952,639 Total equity 2,160,202 2,418,735 3,593,750 4,646,859 5,878,180 Total capitalization 3,560,687 4,494,232 6,392,491 6,835,415 7,830,819 Total homebuilding debt to capitalization ratio 39.3% 46.2% 43.8% 32.0% 24.9% Total homebuilding debt 1,400,485 2,075,497 2,798,741 2,188,556 1,952,639 Less: cash and cash equivalents (300,179) (329,645) (532,843) (724,488) (487,151) Net homebuilding debt 1,100,306 1,745,852 2,265,898 1,464,068 1,465,488 Total equity 2,160,202 2,418,735 3,593,750 4,646,859 5,878,180 Total capitalization 3,260,508 4,164,587 5,859,648 6,110,927 7,343,668 Net homebuilding debt to capitalization ratio 33.7% 41.9% 38.7% 24.0% 20.0% In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”), we provide our investors with supplemental information relating to net homebuilding debt to capitalization ratio. Net homebuilding debt to capitalization ratio is a non-GAAP financial measure we calculate by dividing (i) total debt, plus unamortized debt issuance cost/(premium), net, and less mortgage warehouse borrowings, net of unrestricted cash and cash equivalents (“net homebuilding debt”), by (ii) total capitalization (the sum of net homebuilding debt and total stockholders’ equity). We use the ratio of net homebuilding debt to total capitalization as an indicator of overall financial leverage and to evaluate our performance against other companies in the homebuilding industry. In the future, we may include additional adjustments to the extent we deem them appropriate and useful to management and investors. Because we use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry, we believe this measure is also relevant and useful to investors for that reason. Non-GAAP financial measures should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours. A reconciliation to the comparable GAAP measure is presented above.